Petition for Writ of Certiorari — Dworsky v. Warner

IN THE CHARLES Fi}

Supreme Court of the United States

October Term, 1951

No. £18

JEROME DWORSKY, ZOLLIE DWORSKY, PETER

DWORSKY and HARRY DWORSKY, Individually and

as Co-partners, Doing Business as NORTH UNION

CO., GRACE B. WRIGHT, LOUIS SACHS, JOSEPH

L. NATHANSON and CARL K. LIFSON, Petitioners,

vs.

C. E. WARNER, as Trustee in Bankruptcy of HYMAN

COHEN, an Individual, Doing Business as AMERI-

CAN FOOTWEAR CO., Bankrupt, Respondent.

PETITION FOR WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE EIGHTH CIRCUIT

MELVIN H. SIEGEL,

1036 Andrus Building,

Minneapolis, Minnesota,

Counsel for Petitioners.

Of Counsel:

LEONARD, STREET & DEINARD,

1036 Andrus Building,

Minneapolis, Minnesota.

AT. 3539 Hayward-Court Brief Printing Co., Minneapolis 15, Minn. AT. 3539

— ———— = ————— ————e_-—_=- ~~ a LLL ncn ccccc ccc enn ee as rere, Sh

INDEX

Page

Opinions NE Los ra ue wy wens va nevada 2

ra OL Sale ct ha ie Ora Kd AG ARO Re RD 2

FIT OE rE ee a 3

es as od 66s dd Wd SHOE COW R ORS 3

RS GP OUP OID, ook vvicehcvensscensenwnses 4

Specification of errors to be urged................. 6

Reasons for granting the writ..................... 6

SEE «8-3 Ska chek eee ee eb oceans 15

AUTHORITIES CITED

CASES:

Armstrong’s Administrator v. Sumne & Ratter-

man Co., 211 Ky. 750, 278 S. W.111............ 10

Crenshaw v. McKinley (C. A. 2), 116 F. (2d) 877.. 14

Emil v. Hanley, 318 U.S. 515............ 8, 9, 12, 13

Ex parte Collett, 337 U.S. 55................... 12

Fox v. Summit King Mines (C. A. 9), 143 F. (2d)

Re er ee ey er rye ry rere 10

Gregory v. United States, 17 Blatchf. 325........ 10

Harris v. First National Bank, 216 U.S. 382...... 7

Mayer v. Hellman, 1 Otto 496................... 14

Park v. Cameron, 237 U.S. 616................. 7, 9

Pirie v. Chicago Title & Trust Co., 182 U.S. 438... 14

Schwegmann v. Calvert Distillers Corp., 341 U. S.

RE Serer eae ee eee ae ee eee ee 12

Siegel v. Municipal Capital Corp. (C. A. 2), 102 F.

8 eee ere eo ee 7, 9

United States v. National City Lines, 337 U.S. 78.. 12

Waite v. Gottstein (D. C. Wash.), 224 F. 281. 4, 9

Wilson v. Nelson, 183 U.S. 191................ 6, 10

STATUTES:

Act of June 22, 1938 (Chandler Act), c. 575, Sec-

tion 70e, 52 Stat. 882 (11 U. S. C. 1946 ed., Sec-

I oo naka Si seeks clean eae eee 2, §

Bankruptcy Act of 1898, c. 541, Sec. 70e, 30 Stat.

566, as amended by Act of Feb. 5, 1903, c. 487,

Sec. 16, 32 Stat. 800 (11 U. S. C. 1934 ed., Sec-

TL ns ov bd ks BO AWA OR ee ee ee 3

CONGRESSIONAL COMMITTEE REPORTS:

H. Rept. No. 1409, 75th Cong., 1st Sess., pp. 2, 3, 5,

SEE Eee 8, 11, 13,

TEXTS:

1 Collier on Bankruptcy (14th ed.), Sec. 2.78, p. 349

2 Collier on Bankruptcy (14th ed.), Sec. 23.15, pp.

Pt cee ohana acne vise nsckin ees

RS a ee

Hanna and McLaughlin, The Bankruptcy Act of

1898 as Amended Including The Chandler Act of

ST le ee ea

Mulder and Forman, Bankruptcy and Arrangement

Proceedings (American Law Institute (1951) ),

ee Gh anne aikeennh wna

ES gh ee er na

MISCELLANEOUS:

Chandler, Walter, The Revised Bankruptcy Act of

1938, 24 A. B. A. Jour. 882 (Nov., 1938) ........

David, L. H., Analysis of The New Chandler Act,

Al Corp. Reorg. Combined with Am. Bank Rev.

501-510 (June and July, 1938)................

Donovan, William J., Administration of Bankrupt

ee ah sis wae s Walk ae vs

Dvoret, Mitchell S., Bankruptcy Under The Chand-

ler Act: Analysis, 27 Georgetown L. Rev. 609-

EE a

Dvoret, Mitchell S., Bankruptcy Under The Chand-

ler Act: Background, 27 Georgetown L. Rev.

a ia nanan 5 55 bees nese

Greenbaum, S. M., Plenary, Summary and Concur-

rent Jurisdiction Under The Bankruptcy Act,

9 J. B. A. Dist. Col. 463, 499 (Oct. and Nov.,

ee ee a eile a in Go 46-4 oe 0,8

Hastings-Michener Bill (H. R. 9968, S. 3866, 72nd

14

14

9

10

10

9

ER a 11

eee

a

Hollins, S. F., The Chandler Act, 14 Calif. S. B. J. 1

I bi beaks £44k to 4 kan coho dees

Kenney, R. J., Creditors Rights Under The Bank-

ruptcy Act, 33 Marq. L. Rev. 135 (1949).......

King, Paul H., Pivotal Points of The Chandler Act,

43 Com. L. J. 326 (Sept., 1938) ................

Leibell, Vincent J., Jr., The Chandler Act—Its Ef-

fect Upon The Law of Bankruptcy, 9 Fordham L.

Se ee I ns os ne vbw a Gb owovens

Levy, E. B., The Chandler Act for Creditors, 43

Comme a, D. GR CIOE., TED 5. wc ccc cccccccces

Liens and Fraudulent Transfers Under The Chand-

ler Act, 87 U. of Pa. L. Rev. 324-327 (Jan., 1939)

McLaughlin, James A., Aspects of The Chandler

Bill to Amend The Bankruptcy Act, 4 U. of Chi.

L. Rev. 384-388 (April, 19387).................

Oldham, D. M., Chandler Amendment to The Na-

tional Bankruptcy Act, 17 Tex. L. Rev. 329-334

ee ea ye gh a gud oon wi

Oldham, D. M., Plenary, Summary and Concurrent

Jurisdiction Under The Chandler Act, 15 J. N. A.

Ref. Bank. 42-44 (Oct., 1940).................

Parker, G. W., The Chandler Act as to Changes

Effected, 45 Com. L. J. 469 (Jan.,1940)........

Report of the Attorney General on Bankruptcy

Law and Practice (S. Doc. No. 65, 72nd Cong.,

I sages Or a Ces A

Russell, M. A., The Chandler Act, 5 John Marshall

ey ee I MO yo db a tus ete n oe viene

spear RNet 7¢

rd

IN THE

Supreme Court of the United States

October Term, 1951

No.

JEROME DWORSKY, ZOLLIE DWORSKY, PETER

DWORSKY and HARRY DWORSKY, Individually and

as Co-partners, Doing Business as NORTH UNION

CO., GRACE B. WRIGHT, LOUIS SACHS, JOSEPH

L. NATHANSON and CARL K. LIFSON, Petitioners,

vs.

C. E. WARNER, as Trustee in Bankruptcy of HYMAN

COHEN, an Individual, Doing Business as AMERI-

CAN FOOTWEAR CO., Bankrupt, Respondent.

PETITION FOR WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE EIGHTH CIRCUIT

To THE HON. CHIEF JUSTICE AND ASSOCIATE JUSTICES OF

THE SUPREME COURT OF THE UNITED STATES:

Your petitioners, Jerome Dworsky, Zollie Dworsky,

Peter Dworsky, Harry Dworsky, Grace B. Wright, Louis

Sachs, Joseph L. Nathanson and Car! K. Lifson, respect-

fully pray for a writ of certiorari to review the judgment

of the United States Court of Appeals for the Eighth

Circuit entered in the above entitled case on January 29,

2

1952, and in support thereof respectfully show to the

court:

OPINIONS BELOW

The opinion of the District Court (R. 22-28) is re-

ported at 98 F. Supp. 466. The opinion of the court below

(R. 32-39) is reported at 194 F. (2d) 277.

JURISDICTION

The judgment of the court below was entered on

January 29, 1952 (R. 40). The jurisdiction of this Court

is invoked under Section 47c of Title 11 U. S. C. and un-

der Sections 1254 and 2101 of Title 28 U. S. C.

QUESTION PRESENTED

Assignees for the benefit of creditors allegedly pro-

cured an assignment from a bankrupt and thereafter

transferred the property assigned more than four months

prior to bankruptcy, all pursuant to an alleged plan to

defraud the bankrupt.

The question presented is whether the transfers made

by the assignees pursuant to such fraud practiced on the

bankrupt constitute transfers “suffered by’’ the bank-

rupt in fraud of creditors within the reach of Section 70e

of the National Bankruptcy Act as amended.

STATUTES INVOLVED

Section 70e of the National Bankruptcy Act as amended

by the Act of June 22, 1938, commonly known as the

Chandler Act (c. 575, Sec. 70e, 52 Stat. 882, 11 U. S. C.

1946 ed., Sec. 110e), provides:

“e. (1) A transfer made or suffered or obligation

incurred by a debtor adjudged a bankrupt under this

Act, which, under any Federal or State law applica-

ble thereto, is fraudulent as against or voidable for

3

any other reason by any creditor of the debtor, hav-

ing a claim provable under this Act, shall be null

and void as against the trustee of such debtor.

“(2) All property of the debtor affected by any

such transfer shall be and remain a part of his as-

sets and estate, discharged and released from such

transfer and shall pass to, and every such transfer

or obligation shall be avoided by, the trustee for the

benefit of the estate. The trustee shall reclaim and

recover such property or collect its value from and

avoid such transfer or obligation against whom-

ever may hold or have received it, except a person

as to whom the transfer or obligation specified in

paragraph (1) of this subdivision e is valid under

applicable Federal or State laws.

“(3) For the purpose of such recovery or of

the avoidance of such transfer or obligation, where

plenary proceedings are necessary, any State court

which would have had jurisdiction if bankruptcy

had not intervened and any court of bankruptcy

shall have concurrent jurisdiction.” 11 U. S. C. 1946

ed., Sec. 110e.

Prior to the amendment by the Chandler Act, Section

70e of the 1898 Bankruptcy Act (c. 541, Sec. 70e, 30 Stat.

566, as amended by Act of February 5, 1903, c. 487, Sec.

16, 32 Stat. 800, 11 U. S. C. 1934 ed., Sec. 110e), pro-

vided:

“The trustee may avoid any transfer by the bank-

rupt of his property which any creditor of such

bankrupt might have avoided, and may recover the

property so transferred, or its value, from the per-

son to whom it was transferred, unless he was a

bona fide holder for value prior to the date of the

adjudication. Such property may be recovered or its

value collected from whoever may have received

it, except a bona fide holder for value. For the pur-

pose of such recovery any court of bankruptcy as

hereinbefore defined, and any State court which

would have had jurisdiction if bankruptcy had not

intervened, shall have concurrent jurisdiction.” 11

U.S. C. 1934 ed., Sec. 110e.

4

STATEMENT OF THE CASE

The essential facts as alleged in the amended com-

plaint may be briefly stated. On June 2, 1947, the defen-

dants, Louis Sachs, Joseph L. Nathanson and Carl K.

Lifson, procured the bankrupt, one Hyman Cohen, to

execute a trust deed of general assignment appointing

them trustees of the bankrupt’s non-exempt property,

upon the fraudulent representations that they would

operate the business of the bankrupt in a normal man-

ner, pay all pressing claims of non-assenting creditors,

and treat all creditors on an equal basis (R. 4). In

fact, they then intended to transfer the trust property

to their co-defendants and to other persons, pursuant to

a plan and conspiracy of all the co-defendants to defraud

the bankrupt (R. 4-5). Pursuant to such conspiracy and

with the intent on the part of the defendant trustees to

hinder, delay and defraud creditors (R. 6-7), the trus-

tees, between the dates of June 2, 1947, and January 1,

1948, made three transfers of the trust property, two of

them to their co-defendants (R. 5-6) and one to a third

party (R. 6), each without a fair consideration, thereby

rendering the bankrupt insolvent, in violation of the

statutes of the state of Minnesota (R. 6). The bankrupt

executed the trust deed “relying upon the fraudulent

representations and the promises aforesaid, and without

knowledge of the fraudulent concealment of said Sachs,

Nathanson and Lifson aforesaid, * * *” (R. 5).

An involuntary petition in bankruptcy was filed against

Cohen on April 5, 1948 (R. 1), more than ten months

after the execution of the trust deed.

This action was thereafter commenced by the plaintiff

as trustee in bankruptcy of Cohen to set aside each of

the three transfers by the defendant trustees alleged in

the amended complaint as in fraud of creditors, and to

5

require the defendants to deliver up the property so

transferred, or, if they failed to do so within a period to

be fixed by the court, to pay the sum of $157,206.64

(R. 8). No demand was made to set aside the original

transfer from the bankrupt to the defendant trustees

under the trust deed of June 2, 1947. As the District

Court observed, “The plaintiff here relies upon the trans-

fer from the [defendant] trustees to the other defen-

dants as the transfer which was fraudulent as against

the creditors” (R. 25).

Jurisdiction of the United States District Court in

bankruptcy was sought to be invoked under Section 70e

of the Bankruptcy Act as amended (R. 1). No diversity

of citizenship or any other independent ground for in-

voking the jurisdiction of the federal courts is alleged.

Motions to dismiss for lack of jurisdiction, filed by

each of the defendants (R. 17-21), were granted by the

District Court (R. 22-28). The District Court pointed out

that the “bankrupt Cohen was not a party to the fraudu-

lent transactions between the common-law trustees and

the defendants, and assigned his property to the trustees

in good faith, according to the complaint herein” (R. 23),

and concluded that transfers so made were not “trans-

fers by” the bankrupt under Section 70e prior to the

enactment of the Chandler Act in 1938 (R. 25-26), and

that, although the phrase “transfer made or suffered by”

the bankrupt was substituted in the 1938 amendment,

the “legislative history * * * shows that the Chandler

Act did not intend to change or enlarge the Court’s

jurisdiction or the type of transfer which might be

voided” (R. 26). The District Court accordingly found it

unnecessary to consider whether the complaint stated a

cause of action (R. 28).

On appeal, the court below reversed. It held that there

was “no need to refer to legislative history where statu-

tory language is sensible and unambiguous” (R. 36). It

further held that the word “suffered” as used in Section

70e had acquired such meaning in Wilson v. Nelson, 183

U. S. 191, where the phrase “suffered or permitted” as

used in the definition of a “preference” constituting an

act of bankruptcy, under Section 3—read in the light of

its legislative history—was held to include a judgment

and ensuing execution obtained pursuant to an irrevoca-

ble power of attorney (R. 36-38).

SPECIFICATION OF ERRORS TO BE URGED

1. The court below erred in holding that the trans-

fers made by the assignees were transfers “suffered” by

the bankrupt in fraud of creditors within the reach of

Section 70e of the National Bankruptcy Act as amended.

2. The court below erred in failing to hold the trans-

fers so made were not “suffered” by the bankrupt in

fraud of creditors within the meaning of Section 70e of

the National Bankruptcy Act as amended.

3. The court below erred in failing to hold that the

transfers so made were not transfers “made” by the

bankrupt in fraud of creditors within the reach of Sec-

tion 70e of the National Bankruptcy Act as amended.

REASONS FOR GRANTING THE WRIT

It is common ground that under Section 23b of the

Bankruptcy Act, the federal bankruptcy courts are with-

out jurisdiction of a plenary action save those brought

under Sections 60, 67 and 70 of the Act, in the absence of

diversity of citizenship or other independent grounds for

invoking federal jurisdiction, and that the instant case

7

accordingly may be brought within the jurisdiction of

the District Court only if it involves a transfer within

the reach of Section 70e of the Bankruptcy Act as

amended. The court below, however, held that the trans-

fers in controversy were “suffered” by the bankrupt

within the meaning of Section 70e as amended.

The question thus presented is one of importance in

the administration of the Bankruptcy Act, and was de-

cided by the court below on principles probably in con-

flict with those heretofore established by the decisions

of this Court.

1. The Question Presented Is One of Importance in the

Administration of the Bankruptcy Act.

The decision below, whatever its merits, overturns the

practice and settled course of decision of almost half a

century. Heretofore, it had been established doctrine

that property acquired from the bankrupt by a fraud

practiced upon him was not within the jurisdiction of

the bankruptcy court (Park v. Cameron, 237 U. S. 616,

618; Harris v. First National Bank, 216 U. S. 382, 385;

Siegel v. Municipal Capital Corp. (C. A. 2), 102 F. (2d)

905, 907; Waite v. Gottstein (D. C. Wash.), 224 F.

281, 283), and this upon the ground that in actions in-

volving a wrongful appropriation from the bankrupt “no

attack is made upon a transfer by the bankrupt which

would have been void as to creditors.” Harris v. First

National Bank, loc. cit. supra.

The cases cited, to be sure, were decided under Section

70e of the Bankruptcy Act before its amendment by the

Chandler Act. Until the decision below, however, Section

70e as amended had been administered in accordance

with such prior precedent. So far as appears from the

published reports, this is the first case since the enact-

8

ment of the Chandler Act in which the bankruptcy

court’s jurisdiction has been invoked to recover property

acquired by fraud practiced on the bankrupt. The ex-

planation, we think it fair to say, is not an unprecedented

rectitude in the conduct of business affairs since 1938,

but the settled understanding of the profession that the

jurisdiction of the federal bankruptcy courts under Sec-

tion 70e was unaffected by the amendments of 1938.

Prior to the amendment, transfers voidable under state

law were covered by two sections, 67e and 70e. The

former contained a four-months’ limitation, the latter

did not. Because lawyers “not sufficiently familiar with

the Act and the decisions under 67e and 70e” had “been

misled by the limitation of four months in Section 67e”

the provisions of the two sections were amended so as to

merge in “the more inclusive and wider scope of the ex-

isting 70e” all the provisions governing transfers void-

able under state law. H. Rept. No. 1409, 75th Cong., 1st

Sess., pp. 32, 35; S. Rept. No. 1916, 75th Cong., 3rd Sess.,

p. 17.

Nowhere in the committee reports, nor in the authori-

tative comments in Weinstein, The Bankruptcy Law of

1938, pp. 162-163, whose author is generally recognized

as the “draftsman” of the Chandler Act (see Emil v.

Hanley, 318 U. S. 515, 522), nor in any of the vast litera-

ture on the effect of the Chandler Act, is there even a hint

that the amendment of Section 70e was intended for any

other purpose or to enlarge the jurisdiction of the federal

bankruptcy courts.’ To the contrary, the learned authors

1See Weinstein, The Bankruptcy Law of 1988 (1938) 162-163: Hanna

and McLaughlin, The Bankruptcy Act of 1898 as Amended Including

the Chandler Act of 1938 (1938) 80-81; Mulder and Forman (American

Law Institute), Bankruptcy and Arrangement Proceedings (1951) 76-79;

James A. McLaughlin, Aspects of the Chandler Bill to Amend the Bank-

ruptcy Act (April, 1937), 4 U. of Chi. L. Rev. 384-388; Walter Chandler,

nae

9

of the leading text on bankruptcy assume on the au-

thority of the prior decisions that “the bankruptcy court

will not have jurisdiction of plenary actions against

wrongdoers who have, without the consent of the bank-

rupt, appropriated or misapplied the property of the

estate prior to bankruptcy.” 2 Collier on Bankruptcy

(14th Ed.), Section 23.15, pp. 581-582, citing Park v.

Cameron, supra, Siegel v. Municipal Capital Corp., supra,

Waite v. Gottstein, supra.

This is not, of course, the occasion to consider whether

the result reached by the court below is required by the

unequivocal language of the statute or whether the de-

cision below may otherwise be supported on the merits.

We respectfully suggest, however, that where as here

“Congress was not writing on a clean slate” (Emil v.

Hanley, supra, page 521) such a “major change” (id.

p. 521) in the jurisdiction of the bankruptcy courts

The Revised Bankruptcy Act of 1938 (Nov., 1938), 24 A. B. A. Jour. 882;

Mitchell S. Dvoret, Bankruptcy Under the Chandler Act: Analysis (Mar.,

1939), 27 Georgetown L. R. 609-610; G. W. Parker, The Chandler Act as

to Changes Effected (Jan., 1940), 45 Com. L. J. 469; L. H. David,

Analysis of the New Chandler Act (June and July, 1938), Al Corp.

Reorg. Combined with Am. Bank. Rev. 501-510; Liens and Fraudulent

Transfers Under the Chandler Act (Jan., 1939), 87 U. of Pa. L. Rev.

324-327; D. M. Oldham, Chandler Amendment to the National Bank-

ruptey Act (April, 1939), 17 Tex. L. Rev. 329-334; D. M. Oldham,

Plenary, Summary and Concurrent Jurisdiction Under the Chandler Act

(Oct., 1940), 15 J. N. A. Ref. Bank. 42-44; S. M. Greenbaum, Plenary

Summary and Concurrent Jurisdiction Under the Bankruptcy Act (Oct.

and Nov., 1942), 9 J. B. A. Dist. Col. 463. 499, passim; Paul H. King,

Pivotal Points of the Chandler Act (Sept., 1938), 43 Com. L. J. 326,

passim; E. B. Levy, The Chandler Act for Creditors (Dec., 1938), 43

Com. L. J. 464, passim; Vincent J. Leibell, Jr.. The Chandler Act—Its

Effect Upon the Law of Bankruptcy (Nov., 1940), 9 Fordham L. Rev.

380, passim; M. A. Russell, The Chandler Act (Sept., 1939), 5 John Mar-

shall L. Q. 131, passim; R. J. Kenney. Creditors Rights Under the Bank-

ruptcy Act (1949), 33 Marq. L. Rev. 135, passim; S. F. Hollins, The

Chandler Act (Jan., 1939), 14 Calif. S. B. J. 1, passim.

10

should not be sanctioned without the prior consideration

of this Court.’

2. The Decision Below Is Based on Principles in Prob-

able Conflict With Those Established by This Court.

The decision below, in holding that the legislative his-

tory of Section 70e as amended may not be considered,

is in conflict with principles established by this Court,

principles which in the case of the Chandler Act are

essential to the preservation of the basic scheme of

the Act.

The Chandler Act was the culmination of congres-

sional consideration of proposed revisions of the Bank-

ruptcy Laws extending over a period of almost eight

years.* Following the so-called Donovan Report in

1931, a comprehensive report recommending sweeping

changes was prepared in 1931 under the direction of the

then Solicitor General Thatcher. See Report of the At-

torney General on Bankruptcy Law and Practice, S. Doc.

No. 65, 72nd Cong., 1st Sess., 1932. These recommenda-

2While, as stated, this is not the place to discuss the merits, it may be

noted in passing that the decision below, to say the least, is not plainly

correct. The decision in Wilson v. Nelson, 33 U. S. 191, defining the

phrase “‘suffered’”’ as used in the definition of a “preference” constituting

an act of bankruptcy under Sec. 3 of the 1898 Act, was itself based on

the legislative history, which showed that the term as used in 1898 Act

was intended to have a broader meaning than when previously used in

the 1867 Act, where it had been limited to preferences made with the

consent or participation of the bankrupt. The court below did not find it

necessary to consider other familiar precedents applying the term “suf-

fered” in the more restrictive sense in other contexts. See Fox v. Sum-

mit King Mines (C. A. 9), 143 F. (2d) 926, 932; Gregory v. United

States, 17 Blatchf. 325, 331; Armstrong’s Administrator v. Sumne &

Ratterman Co., 211 Ky. 750, 755, 278 S. W. 111, 113.

3For a full exposition of the historical and legislative background of

the Chandler Act see Mitchell S. Dvoret, Bankruptcy Under the Chan-

dler Act: Background (Dec., 1938), 27 Georgetown L. Rev. 194-207.

4William J. Donovan, Administration of Bankrupt Estates (1931).

11

tions were embodied in the Hastings-Michener Bill (H.R.

9968, S. 3866, 72nd Cong., 1st Sess.), designed to bring

about a complete revision of the existing bankruptcy

system, including the establishment of a central bureau

for the administration of the bankruptcy laws. H. Rept.

1409, 75th Cong., 1st Sess., p. 2.

Dissatisfaction with a centralized administration, and

the reluctance to discard “the interpretation of the act

through court decisions extending over a period of more

than 30 years” (H. Rept. No. 1409, 75th Cong., 1st Sess.,

p. 2), led to the rejection of the Hastings-Michener Bill

and establishment of the National Bankruptcy Con-

ference to consider revisions within the existing frame-

work of the bankruptcy laws. Ib.

The Conference was composed, as the House Judiciary

Committee stated, of ‘‘a nation-wide group of experienced

members of such organizations as the American Bar

Association, the Commercial Law League of America,

the National Association of Credit Men, the National

Association of Referees in Bankruptcy, law school pro-

fessors, authors of law textbooks, and others, all men

schooled in bankruptcy law and procedure,” which “for

more than five years,” was “engaged in the preparation

of proposed amendments, in cooperation with the House

Committee on the Judiciary.” H. Rept. No. 1409, supra,

page 2.

As the House Judiciary Committee further observed,

“extensive hearings were held by the House Judiciary

Committees of the 74th and 75th Congresses,” and

“many excellent suggestions from the National Bank-

ruptcy Conference, from bar associations and from out-

standing attorneys in all parts of the country” were con-

sidered, and “tentative drafts and committee prints”

12

were “published and widely distributed for the purpose

of obtaining suggestions and criticisms.” /d. p. 3.

Before enactment the amendments were carefully con-

sidered and explained in detailed congressional commit-

tee reports and informed comments nowise lacking in

“candor or accuracy.” Cf. Schwegmann Bros. v. Calvert

Distillers Corp., 341 U. S. 384, 396, per Jackson, J.

The record of such extensive and authoritative de-

liberations cannot be ignored consistently with the deci-

sions of this Court. In Ex parte Collett, 337 U. S. 55, 58,

and United States v. National City Lines, 337 U. S. 78, 81,

this Court considered that in like circumstances, the re-

visor’s notes were “obviously authoritative” in constru-

ing the revised Judicial Code, even in the interpretation

of “unmistakable” and “unequivocal” statutory language.

United States v. National City Lines, supra, at 81, 82, 84;

Ex parte Collett, loc. cit. supra.

Precisely the same canon of construction was followed

in Emil v. Hanley, 318 U. S. 515, in interpreting one of

the 1938 amendments added by the Chandler Act. In the

Hanley case, the Court held that Section 2(a) (21) did

not extend to a receiver appointed within four months of

bankruptcy as an incident to enforcement of a lien sur-

viving bankruptcy. Although the section “read literally

would call for a different result” (id. p. 520), the Court

pointed out that such result would overturn the settled

prior practice (id. p. 520), that Congress “was not writ-

ing on a clean slate,” and that the explanation of the

“House Judiciary Committee in its report” was “as

plain an indication as could be” that no such result was

intended. Id. pp. 520, 521. The Court added, ‘We cannot

help but think that if Congress had set out to make such

a major change, some clear and unambiguous indication

of that purpose would appear. But we can find none.”

(Id. p. 521.)

13

The decision of the court below in failing to apply

these principles threatens to undermine the basic scheme

of the Chandler Act. The court below not only disre-

garded the legislative history of Section 70e but con-

strued the Act in general as though it were to be “read

literally” regardless of any contrary intention of Con-

gress manifested in the committee reports. Cf. Emil v.

Hanley, 318 U. S. 515, 520.

Thus, while expressly finding it unnecessary to con-

sider whether the transfers in controversy were ‘“‘made’”’

as well as “suffered” by the bankrupt, the court below

observed that its conclusion was “in harmony” with the

definition of ‘“‘transfer’’ in Section 1(30), which includes

“every” mode of disposing of property “voluntarily” or

“involuntarily,” and also with Section 70a(8) which the

court below thought “indicates that an assignee for the

benefit of creditors is to be regarded merely as the agent

of the bankrupt for the purpose of the Bankrupt Act”

(R. 39).

In its observations on Sections 1(30) and 70a(8), the

court below ignored the committee reports containing

“as plain an indication as could be” of a contrary inten-

tion. Cf. Emil v. Hanley, loc. cit., supra. The report of

the House Judiciary Committee on the Chandler Act

makes clear that the definition of the word “transfer” in

Section 1(30) was intended not to give uniformity of

meaning to that word wherever used in the Act, but

merely to permit uniformity of terminology while leav-

ing the precise meaning to be determined according to

the varying contexts of the several sections.’ Section

5H. Rept. No. 1409, 75th Cong., 1st Sess., p. 5, referring to Sec. 1 (30)

states: “ “Transfer.’—-Clause (30): The reason for the changes in this

definition is that section 60, dealing with preferences, speaks of trans-

fers and judgments; section 67, dealing with liens and fraudulent trans-

fers, speaks of liens, conveyances, transfers, assignments, encumbrances,

14

70a (8) likewise was intended as merely “declaratory of

the law” (H. Rept. No. 1409, 75th Cong., 1st Sess., p. 34;

see also Weinstein, The Bankruptcy Law of 1938, p.158),

under which the assignee of an assignment for the bene-

fit of creditors made, as here, more than four months

prior to bankruptcy, was universally deemed to hold ad-

versely to the bankrupt and not as his agent in a techni-

cal sense. Mayer v. Hellman, 1 Otto 496; see 4 Collier on

Bankruptcy (14th Ed.), Sec. 70.38, p. 1194; 1 Collier on

Bankruptcy (14th Ed.), Sec. 2.78, p. 349.

If the decision below is permitted to stand, it will

establish a rule for the Eighth Circuit—and a precedent

for all others—that Title I of the Chandler Act should

be construed as though Congress were writing “on a

clean slate” and thereby entirely divorce its adminis-

tration from “the interpretation of the act through court

decisions extending over a period of more than 30 years”

(H. Rept. No. 1409, 75th Cong., 1st Sess., p. 2), contrary

to the avowed intention of Congress.

levies, judgments, and attachments; and section 70(e), dealing with the

avoidance by the trustee of transfers, uses merely the term ‘transfer.’

In order to achieve uniformity, the revised terminology of these sections,

wherever possible, is restricted to the latter term. It therefore becomes

necessary to expand the phraseology of this definition, in order to make

certain that it shall include the full scope of all the terms presently em-

ployed in the sections cited.”

Even before the amendment the word “transfer” was broad enough to

include any transfer, voluntary or involuntary, where the context so

required. Prior to the 1938 amendments, the word “transfer’’ was con-

strued by the courts “in its most comprehensive sense to include every

method by which property can pass and by which the result forbidden

by the statutes may be brought about,” (Pirie v. Chicago Title & Trust

Co., 182 U. S. 438, 444), and such {s the reach of the cerm as now

amended. Crenshaw v. McKinley (C. A. 2), 116 F. (2d) 877, 879.

15

CONCLUSION

For the foregoing reasons, it is respectfully submitted

that this petition for a writ of certiorari should be

granted.

Respectfully submitted,

MELVIN H. SIEGEL,

1036 Andrus Building,

Minneapolis, Minnesota,

Counsel for Petitioners.

Of Counsel:

LEONARD, STREET & DEINARD,

1036 Andrus Building,

Minneapolis, Minnesota.